mcliu Posted May 7, 2019 Share Posted May 7, 2019 Just keep lowering that discount rate. Base it on 10 year risk-free rate and you can justify anything. :) Link to comment Share on other sites More sharing options...
deadspace Posted May 7, 2019 Share Posted May 7, 2019 Why not just take a step back from the DCF trees to look at the forest ? Is a company that is on its way to become the effective digital landlord for a large proportion of the worlds small and medium size digital businesses worth more than $40 billion ? -- there's your answer Link to comment Share on other sites More sharing options...
fuzzhead1506 Posted May 7, 2019 Share Posted May 7, 2019 Just keep lowering that discount rate. Base it on 10 year risk-free rate and you can justify anything. :) This thread might not be the place, but it perhaps adds to the discussion so I’ll respond here. I don’t think that SHOP is nearly on the same level of predictability in terms of cash flows as other companies and hence why I am not long given my model. I dont know if SHOP ever gets to 35 % margins nor that they will hit the revenues suggested in my spreadsheet. I am merely offering one way that someone could do an analysis that justifies the current price. Maybe this stops someone from loosing their shirt as a short is really my hope by posting, lest they fall victim the same way that CRM shorts were burned 10 years ago. Do you suppose KO, KDP, or BF.B are properly valued here? I do... the list goes on....Efficient Market Theory and all that. These are the most followed, no growth, steady-state companies, trading at cash flow ratios in the high 20s. I imagine they are valued often to have the nearly the same discount as I applied above (5.5% discount and 3% terminal growth, maybe explicitly stated but likely implied) in many investors’ valuations because interest rates remain quite low. Margins, revenues and the balance sheet drive most valuations and I believe I have provided a simple yet sufficient model for satisfying the request - it seems others disagree. In which case, I am sorry for cluttering the thread. I am appreciative of the quippy remarks and others that have made me understand that I need to double check my math/assumptions because it helps me to put my feelings in writing as well as improving my attention to detail. 8) In my mind, a discount rate is only suggesting what returns will get an investor to the exit multiple implied by the valuation - sort of... reverse DCF type of thinking. I still consider myself to be in the elementary school of valuation, so if you have constructive criticism on my thoughts I’d appreciate some discussion (perhaps on another thread or via PM). Link to comment Share on other sites More sharing options...
Liberty Posted July 11, 2019 Share Posted July 11, 2019 https://stratechery.com/2019/shopify-and-the-power-of-platforms/ Link to comment Share on other sites More sharing options...
lucasnascimento Posted September 11, 2019 Share Posted September 11, 2019 Honest question: why don't Shopify try to make their own accounting software to compete with Quickbooks? It seems to be a very high margin business, and it appears to be easy to cross-sell it to their platform's customers. Maybe I don`t really understand the moat around accounting software or how painful it can be to develop this kind of software. Does anybody have a clue? Link to comment Share on other sites More sharing options...
chesko182 Posted September 12, 2019 Share Posted September 12, 2019 https://techcrunch.com/2019/09/09/shopify-buys-warehouse-automation-tech-developer-6-river-systems-for-450-million/ This is pretty relevant news, basically following the Amazon playbook back when they bought KIVA Systems a couple of years ago (now Amazon Robotics). 6river was founded by ex-Kivas and was considered one of the independent leaders in warehouse automation. Warehouses and FCs are pretty ripe for automation disruption and this makes perfect sense if they want to achieve scale and compete with Amazon. Amazon Robotics is the clear leader in warehouse automation by now and a big part of their moat around logistics. Typically these robots can achieve 2-3x productivity gains vs. manual labor. Link to comment Share on other sites More sharing options...
Liberty Posted October 28, 2019 Share Posted October 28, 2019 https://traviswiedower.com/2019/10/28/shopify-and-its-strong-competitive-advantages-continue-to-take-market-share/ Link to comment Share on other sites More sharing options...
Liberty Posted November 6, 2019 Share Posted November 6, 2019 20-min interview of Tobi: Link to comment Share on other sites More sharing options...
Liberty Posted November 8, 2019 Share Posted November 8, 2019 Negative article about Shopify (for a change): https://www.modernretail.co/platforms/almost-a-scam-as-dtc-brands-grow-shopify-is-struggling-to-keep-up/ h/t Marcelo P. Lima Link to comment Share on other sites More sharing options...
Liberty Posted December 6, 2019 Share Posted December 6, 2019 New interview with Tobi: https://pca.st/olctiemg Link to comment Share on other sites More sharing options...
Liberty Posted January 13, 2020 Share Posted January 13, 2020 Scuttleblurb analysis of WIX and SHOP (subscription required): https://www.scuttleblurb.com/shop-wix/ Link to comment Share on other sites More sharing options...
mcliu Posted January 13, 2020 Share Posted January 13, 2020 That valuation though: $50 billion for 100% of Shopify (100% of "$1.5B in revenue/$0 earnings") vs $50 billion for 9% of BRK.B (9% of "$225B in revenue/$20B operating earnings" + 9% of "$250B stock portfolio") :o Link to comment Share on other sites More sharing options...
gary17 Posted January 13, 2020 Share Posted January 13, 2020 the same analogy can be said about AMZN 10 years ago vs Berkshire 10 years ago - but clearly for the last 10 years AMZN has been a better investment. gary Link to comment Share on other sites More sharing options...
mcliu Posted January 13, 2020 Share Posted January 13, 2020 the same analogy can be said about AMZN 10 years ago vs Berkshire 10 years ago - but clearly for the last 10 years AMZN has been a better investment. gary So this is the next Amazon? Link to comment Share on other sites More sharing options...
gary17 Posted January 13, 2020 Share Posted January 13, 2020 nobody knows even warren 10 years ago couldn’t see amazon’s success today Link to comment Share on other sites More sharing options...
Spekulatius Posted January 13, 2020 Share Posted January 13, 2020 the same analogy can be said about AMZN 10 years ago vs Berkshire 10 years ago - but clearly for the last 10 years AMZN has been a better investment. gary So this is the next Amazon? AMZN 10 years ago didn’t trade at the valuation that SHOP is trading now. Link to comment Share on other sites More sharing options...
gary17 Posted January 13, 2020 Share Posted January 13, 2020 the same analogy can be said about AMZN 10 years ago vs Berkshire 10 years ago - but clearly for the last 10 years AMZN has been a better investment. gary So this is the next Amazon? AMZN 10 years ago didn’t trade at the valuation that SHOP is trading now. i am by no means suggesting SHOP's valuation makes sense but two things that are diff than 10 years ago: 1) the e commerce platform is much more developed today (IG, FB, etc) 2) interest rates are higher 10 years ago. it's hard to do an apples to apples comparison... Gary Link to comment Share on other sites More sharing options...
Liberty Posted January 14, 2020 Share Posted January 14, 2020 AMZN 10 years ago didn’t trade at the valuation that SHOP is trading now. It was also a completely different business with different end-state economics (the retail part, AWS at the time was nothing). But definitely some of the same dynamics (investments in growth and underpricing to accelerate growth masking true earning power). Link to comment Share on other sites More sharing options...
valueinvestor Posted April 21, 2020 Share Posted April 21, 2020 For many years I've been interested in "optically" expensive and messy un-modelable stocks because they are the largest basket of stocks that came up year-after-year consistent outperformance. Looking at Shopify many may believe the run-up from April 2 to now is unbelievable, but with the coronavirus, I think this stock is more compelling (dare I say - undervalued). The "aha moment" is when I spoke to people/businesses with e-commerce websites and created e-commerce websites myself, Shopify is the Google of e-commerce builders versus the bings of the world. There are many instances where businesses tried to move away from Shopify but end up going back to them - hence there's also huge pricing power with their products. Would this be a bet-the-farm type of situation? No... but I feel like my grandchildren will scoff at me not investing. After the run-up, I haven't sold and in fact, bought more (not huge since it is a big part of my portfolio). However, the way I look at this is a company with very stable economics with hidden assets, such as their app store, AR, Shopify Capital, e-commerce business sale page, and much more. To justify it at today's valuation - in ten years it has to do about $100B in revenues, which I believe it can if it issues stocks at highs and invest in long run-way projects that could be huge winners. Link to comment Share on other sites More sharing options...
K2SO Posted April 22, 2020 Share Posted April 22, 2020 To justify it at today's valuation - in ten years it has to do about $100B in revenues, which I believe it can if it issues stocks at highs and invest in long run-way projects that could be huge winners. It's a great company, no doubt. But 10 years is a long time to wait to justify today's valuation. What's your discount rate? Link to comment Share on other sites More sharing options...
Orange Posted April 22, 2020 Share Posted April 22, 2020 I don't comment in this forum normally, but as someone who has ran an ecommerce business full time for the last 3 years, reading this thread full of investors who clearly don't have a deep understanding of the ecommerce game, is particularly illuminating. It gives me a better perspective of how Mr. Market can get things wrong for long periods of time. Shopify is going to make $100B in revenue in ten years apparently. According to a "valueinvestor." Just... wow. The most important thing is really- Shopify sells a tool. It's a nice tool, they do a good job of marketing that tool, it's a well known quality tool. But it's just a tool. The engine to any ecommerce business is web traffic, or customers. Cost of customer acquisition makes or breaks you. Shopify provides no way to gain attention, they have no retail customers. Speaking on behalf of ecommerce store owners, we are slaves to the platforms where the customers hangout. Slave to Facebook, slave to Instagram, slave to Pinterest, slave to Google, super-slave to Amazon. I sell on Amazon, if I wanted to switch to another platform, I would have to entirely rebuild my marketing strategy and core business model. THAT is what high switching costs look like. THOSE businesses are truly valuable, and deserve rich valuations. Shopify does not have truly high switching costs for us ecommerce sellers. They really do not have as much pricing power as investors think, and a large % of their customer base is relying on supply chains that have been permanently disrupted due to Covid. This is a dangerous time to invest in this company IMO, unless the purpose is pure speculation over the short term. Link to comment Share on other sites More sharing options...
arcube Posted April 22, 2020 Share Posted April 22, 2020 I don't comment in this forum normally, but as someone who has ran an ecommerce business full time for the last 3 years, reading this thread full of investors who clearly don't have a deep understanding of the ecommerce game, is particularly illuminating. It gives me a better perspective of how Mr. Market can get things wrong for long periods of time. Shopify is going to make $100B in revenue in ten years apparently. According to a "valueinvestor." Just... wow. The most important thing is really- Shopify sells a tool. It's a nice tool, they do a good job of marketing that tool, it's a well known quality tool. But it's just a tool. The engine to any ecommerce business is web traffic, or customers. Cost of customer acquisition makes or breaks you. Shopify provides no way to gain attention, they have no retail customers. Speaking on behalf of ecommerce store owners, we are slaves to the platforms where the customers hangout. Slave to Facebook, slave to Instagram, slave to Pinterest, slave to Google, super-slave to Amazon. I sell on Amazon, if I wanted to switch to another platform, I would have to entirely rebuild my marketing strategy and core business model. THAT is what high switching costs look like. THOSE businesses are truly valuable, and deserve rich valuations. Shopify does not have truly high switching costs for us ecommerce sellers. They really do not have as much pricing power as investors think, and a large % of their customer base is relying on supply chains that have been permanently disrupted due to Covid. This is a dangerous time to invest in this company IMO, unless the purpose is pure speculation over the short term. +1. Shopify is now the 2nd largest company in Canada by market cap, passing TD Bank today -- behind only the Royal Bank of Canada. I believe the attached is driving the current momentum. Not sure how long this will last. Link to comment Share on other sites More sharing options...
rb Posted April 22, 2020 Share Posted April 22, 2020 +1. Shopify is now the 2nd largest company in Canada by market cap, passing TD Bank today -- behind only the Royal Bank of Canada. I believe the attached is driving the current momentum. Not sure how long this will last. Ouch! History is hasn't been kind to Canadian companies that shot to the top of market cap list and weren't a bank. Link to comment Share on other sites More sharing options...
matts Posted April 22, 2020 Share Posted April 22, 2020 I don't comment in this forum normally, but as someone who has ran an ecommerce business full time for the last 3 years, reading this thread full of investors who clearly don't have a deep understanding of the ecommerce game, is particularly illuminating. It gives me a better perspective of how Mr. Market can get things wrong for long periods of time. Shopify is going to make $100B in revenue in ten years apparently. According to a "valueinvestor." Just... wow. The most important thing is really- Shopify sells a tool. It's a nice tool, they do a good job of marketing that tool, it's a well known quality tool. But it's just a tool. The engine to any ecommerce business is web traffic, or customers. Cost of customer acquisition makes or breaks you. Shopify provides no way to gain attention, they have no retail customers. Speaking on behalf of ecommerce store owners, we are slaves to the platforms where the customers hangout. Slave to Facebook, slave to Instagram, slave to Pinterest, slave to Google, super-slave to Amazon. I sell on Amazon, if I wanted to switch to another platform, I would have to entirely rebuild my marketing strategy and core business model. THAT is what high switching costs look like. THOSE businesses are truly valuable, and deserve rich valuations. Shopify does not have truly high switching costs for us ecommerce sellers. They really do not have as much pricing power as investors think, and a large % of their customer base is relying on supply chains that have been permanently disrupted due to Covid. This is a dangerous time to invest in this company IMO, unless the purpose is pure speculation over the short term. Thank you. This is the kind of first-hand expertise we need more on the forum. I hope you post more often going forward. Link to comment Share on other sites More sharing options...
KCLarkin Posted April 22, 2020 Share Posted April 22, 2020 If you are a seller who relies on Amazon or Google, you have a job not a business. Disclosure: No position. I question the economics of the business but they meet an important need and do it very well. Link to comment Share on other sites More sharing options...
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